The Connecticut Supreme Court has announced a decision upholding the right of workers' compensation insurers to pursue equitable subrogation claims against third parties who cause a worker's injuries. The decision in Pacific Insurance Company, Ltd. v. Champion Steel, LLC also contains language supporting insurers' equitable subrogation rights generally.

Pacific Insurance paid workers' compensation benefits to its insured's employee after a construction accident, then sought to bring equitable subrogation claims against Champion Steel and other third parties. The defendants argued, and the trial court held, that Pacific Insurance had no standing to bring suit because the Workers' Compensation Act allowed only employers and employees to sue third party tortfeasors.

Pacific Insurance appealed, and the Connecticut Supreme Court reversed. The Court first held that Pacific Insurance has standing, because its obligation to pay workers' compensation benefits gives it a colorable claim of injury and a direct interest in the outcome of the action. The Court next observed that it was "beyond dispute" that equitable subrogation was available to insurers at common law. While the Workers' Compensation Act created a new statutory right for employers to sue third party tortfeasors, nothing in the Act abrogated the insurers' common law subrogation rights. The Court further held that because employees and employers may not always have an incentive to sue third party tortfeasors after workers' compensation benefits have been paid, allowing insurers to do so supports the public policies of containing the cost of insurance and preventing the unjust enrichment of tortfeasors.

Pacific Insurance was represented on appeal by Wiggin and Dana attorneys Jonathan Freiman and Jenny Chou, partners in the firm's Insurance Practice Group and Appellate and Complex Legal Issues Practice Group.

This case follows on the heels of another case in which Wiggin and Dana helped an insurer collect money owed by another party. The Massachusetts Supreme Judicial Court agreed with Wiggin and Dana's arguments, made on behalf of The Insurance Company of the State of Pennsylvania, that when an insurer pays a claim it may seek reimbursement from another insurer under principles of equitable contribution even when the insured had not tendered the claim to that other insurer. For additional information on that case, please click here.